Suppose that the inflation rate during a year is 5 per cent. During that year, you deposited $500 in your bank account and received an annual nominal interest rate of 10 per cent. What is the real purchasing power of your deposit at the end of the year? $500 $550 $525 $523
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- Suppose that the inflation rate during a year is 5 per cent. During that year, you deposited $500 in your bank account and received an annual nominal interest rate of 10 per cent. What is the real
purchasing power of your deposit at the end of the year?
- $500
- $550
- $525
- $523
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Solved in 2 steps
- Suppose your annual nominal income for the next four years is $78,500, and the annual inflation rate is 7.1%. Calculate the real value of your $78,500 salary at the end of the fourth year.If the annual inflation rate in an economy is i, then $1 borrowed at the beginning of a year will have the same purchasing power as ________ dollars at the end of the year. i (1/i) (1 − i) (1 + i)Suppose your annual nominal income for the next four years is $78,500, and the annual inflation rate is 7.1%. Calculate the real value of your $78,500 salary at the end of the fourth year. A. $57,847.11 B. $59,664.06 C. $65,768.24 D. $71,987.16 E. $73,142.88
- Calculate the real interest rate per month if the nominal inflation-adjusted interest rate per year, compounded monthly, is 18% and the inflation rate per month is 0.5%.The following represents the inflation rates of foreign country X for the past 5 years: Year 1: 35% Year 2: 20% Year 3: 25% Year 4: 30% Year 5: 15% Which statement is correct about the selection of a functional currency for country X at the end of year 5. a. Country X is highly inflationary; the US dollar must be used b. Country X is highly inflationary; the foreign currency must be used c. Country X is not highly inflationary; the US dollar must be used d. Country X is not highly inflationary; either the US dollar or the foreign currency may be used depending on the factors to determine the functional currency e. Country X is not highly inflationary; the foreign currency must be usedIf the interest rate on a one-year loan is 5%5% and the expected inflation rate is −2%−2% for the same period, what is the expected real interest rate on the loan?
- For a nominal inflation-adjusted interest rate of 24% per year compounded monthly, calculate the real interest rate per month when the inflation rateis 0.5% per month.You purchase a certificate of deposit that pays an advertised rate of 2.30% interest per year. Your real rate of return if the actual inflation rate is 1.75% is ____% [round to the nearest hundredth of a percent].Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Cho's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Cho will not buy seven-tenths of a movie ticket. Number of tickets Cho can purchase options:…
- Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Cho's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Cho will not buy seven-tenths of a movie ticket. Fill in the annual inflation chart Choices…Suppose Amy is an avid reader and buys only comic books. Amy deposits $4,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a comic book is priced at $10.00. For each of the annual inflation rates given in the following table, first determine the new price of a comic book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Amy's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Round your answers in the first row down to the nearest comic book. For example, if you find that the deposit will cover 20.7 comic books, you would round the purchasing power down to 20 comic books under the assumption that Amy will not buy seven-tenths of a comic book. Annual Inflation Rate…Consider the following price information: Year 1 Year 2 Cup of Coffee $0.5 $1.00 Glass of Milk. $1.00 $2.00 a. Based on the information given, what was the inflation rate between year 1 and Year 2 b. What happened to the price of coffee relative to that of milk between year 1 and year 2
